Fast-food chains agree to end 'no-poaching' policies

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Thursday, July 12 2018
AP

SEATTLE (AP) — Seven national fast-food chains have agreed to end policies that block workers from changing branches — limiting their wages and job opportunities — under the threat of legal action from the state of Washington.

Washington Attorney General Bob Ferguson announced binding agreements with the companies — McDonald's, Auntie Anne's, Arby's, Carl's Jr., Jimmy John's, Cinnabon and Buffalo Wild Wings — at a news conference Thursday. McDonald's had previously announced plans to end the practice.

The so-called no-poach policies prevent franchises from hiring workers away from other franchises of the same chain. That's been convenient for franchise owners, who sometimes worry about workers they've trained jumping to nearby branches.

But it has also blocked experienced workers at one franchise from getting better-paying jobs at others, potentially keeping tens of thousands of employees around the country stuck in low-wage positions.

Without access to better job opportunities at other franchises, workers have less leverage to seek raises in their current positions, Ferguson said.

"Our state antitrust laws are very clear: Businesses must compete for workers the same way as they compete for customers," Ferguson said. "You can't rig the system to avoid competition."

In separate agreements filed Thursday in King County Superior Court in Seattle, the companies denied that their policies are illegal, but said they wanted to avoid expensive litigation. McDonald's said it was pleased to work with Ferguson's office.

"We believe everyone at McDonald's has an opportunity to grow and progress throughout their career," the company said in an emailed statement.

Ferguson credited the businesses for quickly agreeing to end the practice nationwide in response to his legal threats and said fast-food chains that don't follow suit will be sued. The seven chains have more than 500 locations in Washington.

The no-poach policies have been increasingly criticized by Democratic attorneys general and federal lawmakers. Sens. Elizabeth Warren of Massachusetts and Cory Booker of New Jersey wrote to the Justice Department last November expressing concern about their potential illegality. On Thursday they sent a letter to 90 business franchises — not just fast-food companies, but also mail services, fitness chains and more — seeking information about whether they have similar practices.

A coalition of 11 Democratic state attorneys general, led by Maura Healy of Massachusetts, this week announced a separate investigation into the no-poach agreements at several chains, including Arby's, Burger King, Dunkin' Donuts, Five Guys Burgers and Fries, Little Caesars, Panera Bread, Popeyes Louisiana Kitchen and Wendy's.

Robert Cresanti, the president and chief executive of the International Franchise Association, said in a letter to lawmakers last month that many chains have already abandoned no-poaching policies.

But, he said, it remains important to protect the rights of the franchise owners as well as workers, and that such policies may remain necessary to protect training methods or the investment a franchise owner has made in training. In such cases, the policies should be applied in a limited manner so as to not restrict workers more than necessary, he said.

"IFA is confident that there can be a solution that protects brand value and, at the same time, ensures that a new generation of unit employees will continue to grow and advance, benefiting unit employees, franchisees, and franchisors alike," Cresanti wrote.

Ferguson said his office began investigating early this year, prompted by a New York Times article detailing how such policies had stifled wages for fast-food workers.

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This story has been corrected to say that Sens. Elizabeth Warren of Massachusetts and Cory Booker of New Jersey sent a letter Thursday, not Monday, to 90 business franchises seeking information about whether they have similar practices.